There is a simple equation to determine if you are wealthy. From The Millionaire Next Door, it follows:
(Your annual income * Years of age) / 10 = What your total assets should be worth
Now add up all your total assets. Is it above or below the number calculated in the equation?
While it’s a rough calculation, this equation gives a good estimate of where you stand relative to everyone else. It also makes it possible to segment out the savers and the spenders. Savers have more assets than the number calculated and spenders have less. Which one are you?
I like this equation because so often we correlate annual income with wealth. But, due to credit cards and our consumer culture, it is possible to have a big salary and still feel impoverished. I knew a person with three houses and a boat who claimed life was a struggle and complained about their taxes. Never forget that looking wealthy (spenders) and feeling wealthy (savers) are two different things.
Don’t feel bad if you are a spender – almost every force in America is aligned to get you to part with your money as fast as it comes in. It is almost too easy to spend money these days. Back when we paid for things with paper money, you could literally feel the pain of parting with your cash. Now we just swipe a piece of plastic and the pain doesn’t happen.
I’m also not an advocate for a life of grim austerity either. Take life’s pleasures when you can, they are rewarding. As I’ve written before, being grateful for what you have been given is the key to being prosperous.